Liability- and business interruption-related losses, as well as medical costs, are driving modest price increases for RV insurance, according to Randy Sellhorn, senior product manager at Foremost Insurance Group.
“RV pricing will likely remain fairly stable throughout the coming year, with moderate increases across the industry,” says Shawn Los, vice president of specialty transportation at National Interstate Insurance Company. “Loss costs continue to rise as more and more technologically sophisticated vehicles are on the roadways. So while RVs are safer than ever, the cost to repair vehicles is increasing.”
“We’ve seen the industry taking pretty moderate rate increases for the last couple years, and I would expect that to continue,” agrees Heather Rowe, Safeco recreational vehicle product director.
As rates start creeping up, here are three trends you need to know about in order to effectively serve RV insurance clients and prospects in 2016.
New demographics. According to Sellhorn, the “vast majority” of RV owners are age 50 or up. “Boomers by far and away are the biggest part of the market and the biggest highest-dollar purchase type of units,” he says.
As the RV lifestyle grows with the retiring baby boomer generation, “we see more and more full-timers, requiring a unique policy that incorporates the coverage concepts of their previous homeowners coverage and the more traditional personal auto policy,” Los explains.
But “RVing is a very family thing—it tends to be household-oriented,” Sellhorn points out. And as younger buyers continue to establish new households, he says the Recreational Vehicle Industry Association (RVIA) “would tell you there’s an emerging group of Gen X and Gen Y folks” entering the RV market.
Rowe agrees, noting that the average age of RV owners is slowly decreasing. “We’re seeing a generational shift in ownership as the baby boomers—who have driven a lot of the recent growth in RV sales—are joined by Generation X and soon millennials in that core group that really dominates RV ownership,” she says.
As demand for RV insurance begins to increase among younger generations, the industry will “need to put thought into emerging coverage needs and the most effective ways of communicating before, during and after the sales process,” Rowe says. “Those are different certainly as the generations change.”
Be prepared for RV customers to demand greater ease of use in the insurance experience. “It’s about making things easy,” Rowe says, citing strategies like quoting and binding RV insurance on the same policy as private passenger auto. “At Safeco, we understand that as people become more used to having information right at their fingertips, the ability to make those quick purchases becomes more important.”
Los says many younger families taking the plunge into the RV lifestyle may start with a non-motorized trailer unit. Sellhorn has observed that the typical entry vehicle for new RV owners has shifted from a folding camping trailer to what’s known as a hybrid travel trailer.
“They have expansions, they have slide-outs—different things like that,” Sellhorn explains. “It’s a lightweight vehicle, but the roof doesn’t go up and down and it doesn’t have tent sides on it or that type of thing. With the popularity of pickup trucks and sport utility vehicles and even smaller vans, they’ll all pull some of these ultra-light type of things, so the travel trailer seems to be the entry ideal.”
Nontraditional sales sources. Upon completing a study on RV insurance-buying habits, Foremost found that “the biggest source for new business still was those agents who had relationships with dealerships,” says Jeff Bair, head of merchandising and business development, independent agent operations at Foremost. “Many, many customers made their [insurance] purchase decision at the point of sale.”
But if customers are looking elsewhere for RVs, you might be missing out on the opportunity to insure them. “A lot of people are acquiring these products in the resale marketplace,” Bair says. “Those transactions just disappear unless agents are regularly doing good annual reviews with their customers and asking questions about the kind of things they have in their household. They will miss not only the travel trailer, but the boat and ATV they have at their vacation residence, and that’s five or six products.”
According to Sellhorn, the RVIA projects that 377,000 brand-new 2015 model-year travel trailers and motor homes will be manufactured and sold this year. But for every sale involving a new RV, approximately three transactions involving used RVs take place—and the RVIA reports about 58% of those occur person to person.
“When somebody purchases from a dealer, generally they create a financial obligation that requires property insurance because the bank wants that for the loan,” Sellhorn explains. “So there’s a lot of dealers who have a vested interest in making sure they can facilitate that borrowing transaction by finding the customer insurance.”
By contrast, the other 58% of customers “are out there floating around in private sale world, Craigslist or rvtrader.com, selling those units,” Sellhorn says. For example, Bair notes a community in northern Michigan in which travel trailers are set up in quasi permanent camping locations near the lake.
“Over hot dogs and beers one night, people will literally negotiate buying a travel trailer one more unit closer to the lake,” Bair says. “That informal cash sale and that 58% Randy was talking about, even we can’t get at where all those transactions are taking place. Agents know their customers best. They have the best line of sight to get those kind of risks.”
Tiny homes. If you’re in regular contact with a television, you’ve probably gotten wind of the tiny home craze. “The media hype on this is intercontinental ballistic and the sales are tepid,” Sellhorn says. But don’t be surprised if questions about tiny homes reach your agency soon—especially if you have customers who live or travel out West.
Tiny homes are available through companies like Tumbleweed Tiny Homes and Texas Tiny House—which manufacture unique house-shaped vehicles built to RVIA standards—but DIY-minded customers can also purchase the materials online from any number of retailers and tackle the construction themselves, Sellhorn says.
“You can take the building materials down to Lowes or Home Depot or Menards, big-box lumberyard types of places, and they actually have the skew numbers for what you’re purchasing at Lowe’s or Home Depot so you can fax it in and pick it up,” Sellhorn explains.
And while most manufacturers build these products to a construction standard, factoring in simple things like egress to a fire escape and wiring, “the roll-your-own, build your own tiny homes tend to wind up with wood-burning stoves and other kinds of safety issues,” Sellhorn says.
As a result, tiny homes have “bubbled up either in conflict or in observation, so that staff members at the U.S. Department of Housing and Urban Development (HUD) have taken on the effort to clarify definitions of what a manufactured home is, what an RV is and what a recreational trailer is,” Sellhorn says, noting a regulation that’s currently circulating among various departments and could enter the Federal register as early as June 2016.
“They’re making some pretty specific definitions for this tiny home thing, and the tiny home is going to wander into HUD regulation or other purviews,” Sellhorn warns. “So there will still be the guys that build their own, but if you have one that’s built in a manufacturing facility, it’s going to have to be built to the RV industry standard in order to avoid direct regulation by HUD.”
Jacquelyn Connelly is IA senior editor.